BREAKFAST DEALS: Premier pain

Premier Retail's boss Mark McInnes takes aim at shopping centre landlords and the federal government for making life difficult for retailers, but despite the doom and gloom the company is sitting on a healthy balance sheet to make acquisitions and the man behind Premier, Solomon Lew, has never been one to pass on a bargain. Staying in the sector, Target is set to say goodbye to its managing director Launa Inman, who could be on her way to Myer. Meanwhile, James Packer cuts his last tie with the financial services industry after cashing in his 60 million options in Challenger, Robert Millner's Washington H. Soul Pattinson moves to mop up its private equity arm and Macquarie Group cuts staff. Elsewhere, Brockman loses half of its board and Kerry Stokes may have a plan in mind for National Hire Group.

Premier Investments Group, Target

The retail sector continues to generate headlines at a brisk pace, with Solomon Lew's Premier Investments Group posting a 49 per cent fall in net profit for the year to July 31 and Target announcing the departure of managing director Launa Inman. Starting with Premier, which owns fashion outlets Just Jeans, Peter Alexander, Smiggle and dotti, the results are a reflection of the pain the entire sector has been subjected to and Premier's chief executive Mark McInnes yesterday seized the opportunity to hammer home a couple of points that he reckons need to addressed. One of the bees in McInnes' bonnet is the increasingly antagonistic relationship between retailers and landlords that he believes is forcing retailers to walk away from stores. McInnes reiterated that position yesterday, telling the media that some landlords had to realise they have to play ball with retailers on rent in the current environment. The frayed relationship between the two is evident in Premier's recent dispute with a centre landlord in Canberra, where the retailer threatened to shut a Portmans store and drive customers to alternate avenues to win a 30 per cent rent cut. This tension between retailers and landlords was highlighted by McInnes in July in our KGB interview and with both sides unlikely to give ground in a hurry, tempers are only going to rise further. The other issue raised by McInnes is the role the federal government has played in creating an unfair playing field for local retailers when it comes to competing with online rivals, by leaving the present $1000 GST-free threshold on internet purchases unchanged. This is a common refrain from most retailers and one that has a fair share of supporters and critics. For the time being, the retailers are probably better served by channelling their energies into pursuing their own online strategies with gusto, which is something Premier and Myer seem to be doing. The one thing about Premier is that it is sitting on a healthy $300 to $400 million balance sheet and tough sector conditions actually provide an opportunity for Lew and McInnes to pull off an acquisition. Evidently, a bargain hunt is never far from Lew's mind, with the retail magnate telling The Australian Financial Review he would be interested in the right business now that he has a capable team in place. However, he added that the timing will have to be right, which would suggest that a move might not be imminent, but Gresham Private Equity-owned Witchery and Mimco could both be right down Lew's alley. Meanwhile, Wesfarmers-owned retail chain Target is set to lose its managing director Launa Inman, who said that after seven years at the helm it was time to step down and look for new opportunities. She is staying at the post until Wesfarmers finds her replacement and there is no indication that her resignation has been in any way precipitated by the 27 per cent decline in Target's pre-tax earnings for the past financial year. Inman has hinted that she is keen to continue making her mark in the retail sector and The Sydney Morning Herald reports that there is already talk that she may be on her way to listed department store Myer.

James Packer, Challenger Limited

James Packer has evidently severed all of his remaining links to the financial services industry with the media and gambling baron reportedly cashing out his 60 million options in Challenger Limited. The move closes the book on an association that started in 2003 when the Packer family's CPH Investment Corp took a major stake in the annuity provider. Things didn't exactly go to plan as management troubles and the financial crisis knocked the wind out of Challenger's sails. The Packer shareholding was sold in September 2009, with CPH offloading 122 million Challenger shares for $422 million while James Packer also resigned from the board. However, Packer held on to the options, no doubt saving them for a rainy day. Well that day was yesterday, and Packer will make a $78 million windfall. What's interesting here is that Packer will lock in the gains without the options actually being exercised. The options are exercisable at $3.25 each but are not transferable and, rather than Packer selling them to make his money, the AFR reports that the complex deal will see UBS pay him the difference between Challenger's trading price of $4.55 a share and the exercise price. So, UBS has bought a warrant over the stock so that Packer retains the legal interest but the investment bank acquires the beneficial interest. The deal is another sign that Packer's core area of focus now is his gaming empire and the $78 million will no doubt be put to good use.

Washington H. Soul Pattinson, Souls Private Equity Limited

Investment house Washington H. Soul Pattinson & Co has moved to mop up the shares it doesn't already hold in listed investment company Souls Private Equity Limited, with the company's non-executive chairman Robert Millner admitting that may of SPEL's investments had not lived up to expectations and current market conditions mean that the entity just can't function as a listed vehicle. WHSP is offering 16.3 cents for the outstanding stake, a 150.8 per cent premium to SPEL's last closing price of 6.5 cents. The offer values SPEL's private equity shares at $95.5 million and Millner said that the proposal offers SPEL shareholders an exit on their investment at an attractive premium to historical trading prices, and gives those who want to stay on a chance to accept shares in WHSP. The fund, managed by Pitt Capital Partners, has not had the best track record since coming to life in 2004, and ended up buying some assets at the top of the cycle. It sold its holding in Krispy Kreme before it went into administration and has taken hits on its investment in pipes and plastics company Cromford Group, recycler CMA Corporations and Heritage Brands.

Macquarie Group

It was bound to happen sooner or later and, with analysts baying for Macquarie Group to take the axe to its headcount, job cuts are underway at the investment bank. According to the AFR, Macquarie has retrenched 47 personnel from its private wealth management arm and there are more cuts on the way. The redundancies, made on September 9, were centred on Macquarie's Sydney-based support staff in its retail brokerage division. Meanwhile, the paper also reports that Macquarie has made the cut to enter the second round of bidding for Royal Bank of Scotland's aviation leasing unit. Macquarie has been joined by Hong Kong Aviation and the list of contenders also includes UK-based private equity group Terra Firma and CDB Leasing, the financing arm of China Development Bank.

Brockman Resources, Macarthur Coal, AJ Lucas

Brockman Resources has lost half its board in a blink of an eye after the miner's chairman Barry Cusack, along with managing director Wayne Richards and non-executive directors Ross Ashton and David Nixon, all resigned yesterday. Brockman fell to Hong Kong-based Wah Nam International in May and the majority shareholder said at the time that it wanted to hold on to Brockman's board given their knowledge of the $1.9 billion Marillana project. Well, half of that board is now out of the picture and the new appointees have their work cut out for them to come up to speed on the project. Cusack is being replaced by Wah Nam's chairman Peter Luk, while Wright and Brierley have been appointed as non-executive directors. The MD position will be temporarily filled by founding executive director of Brockman and former exploration and resource development general manager Colin Paterson. Meanwhile, Peabody Energy and ArcelorMittal have extended their $4.9 billion takeover bid for Macarthur Coal until October 14. The bid had been due to expire on September 27 and the suitors, currently sitting on a 17.34 per cent stake of Macarthur, are reportedly close to lodging another shareholder notice. In other news, drilling services and oil and gas investment company AJ Lucas has announced a recapitalisation plan with Hong Kong-based private equity firm Kerogen Capital. The plan will see AJ Lucas raise about $110 million with Kerogen taking a 15 per cent stake in the group through a $13.4 million share placement at $1.35 a share. Kerogen is led by former JPMorgan bankers Ivor Orchard and Jason Cheng.

Wrapping up

National Hire Group has gone into a trading halt amid speculation that the company's shareholders are set to receive a privatisation proposal lobbed by none other than Kerry Stokes. NHG is 66 per cent owned by Westrac, the Caterpillar dealership fully owned by Stokes' Seven Group Holdings, and the AFR reports that Stokes is planning to present NHG's shareholders with a proposal to mop up the rest of the company. Meanwhile, The Australian has shed some more light in its latest instalment on how Nine Entertainment's owner CVC Asia Pacific is working to refinance the $3.6 billion debt due in 18 months time. According to the paper, one of the options under consideration is a '144A' bond issue in the US, which is fancy name for raising debt from private debt investors in the US. The idea is that this new debt, possibly to the tune of up to one billion dollars, could be used to reduce the existing $2.6 billion of senior loans. In other news, Gunns shares made a healthy return to the market after an extended hiatus with the timber company saying that it is in talks with two potential investors to partner it in the $2.5 billion Bell Bay pulp mill in Tasmania. Toll Holdings is reportedly aiming to double its American business to $US1 billion through acquisitions, with managing director Paul Little telling Dow Jones Newswires that he had met with several companies last week and found potentially attractive takeover targets. Little wasn't forthcoming on the names but the potential targets are expected to be mid-sized operators.